Look, I know what you’re thinking: why do I HAVE to get a department store credit card? That’s a great question and one that I grappled with for quite some time. On one hand, I hate credit cards and avoid them at all costs unless it’s a true emergency. My husband and I are huge fans of Dave Ramsey’s financial advice and I’m sure that he would take exception to the title of this post, but hear me out.
I’m certainly not an expert on financial matters, but I am an expert on maximizing savings at department stores. And, like acquiring any skill, it takes practice and discipline. Yes, I’ve honed the best skill ever because I get to shop while I do it. I highly recommend it!
Before I get into exactly why I believe that a department store credit card is an absolute necessity, I believe I should do my duty and inform you of all the bad things surrounding them so at least you can make a more informed decision*.
Generally speaking, department stores are smarter the you and me. They don’t offer all the perks of a credit card out of the goodness of their hearts. They make a TON of money off of people who do not pay off their balance every month – far above and beyond all the incentives that are offered. They carry some of the highest interest rates out of any credit card out there.
Department store credit cards usually offer only low credit limits. While low credit limits are not necessarily bad in and of themselves, it is something to take into account when looking at your credit as a whole. If you do not have much available credit, opening a card with a low credit limit can hurt your score, especially if you carry a balance close to the limit.
Before applying for a credit card, it is important to understand that a credit inquiry alone can have a negative effect on your credit score. Each individual inquiry will affect your credit score for 12 months, stay on your credit report for 24 months, and could drop your score between 10 and 30 points. If you have a very high credit score, opening one or two cards may not make any difference in your credit worthiness, but if you open multiple (like around the holidays, for example) your credit score can really take a beating. If you plan on taking out a mortgage on a new home, refinancing your current home, or taking out a loan on a new car, opening a new credit card can have an adverse affect on the interest rate you get. Therefore, don’t open a new card if you know you’re going to be doing any of those things within at least the next year and I would highly advise against opening more than one a year.
Lastly, the average age of your credit history is an important part of your credit score as it counts for about 15 percent of it. Again, if you have a well established credit history, one card may have very little affect, but it is still probably not wise to go open multiple accounts.
Now that I’ve gotten all the unpleasantries out of the way and assuming you’re still reading, let’s talk about why I believe you absolutely SHOULD have a department store credit card.
If you buy from a particular department store frequently and would benefit from all the coupons and extras that the card offers, then opening a store card is an absolute MUST (enter Macy’s, which gives you 20 percent off almost every time you use their card, plus dollar off coupons. Cha-ching!).
If you have little or no credit history, then a store credit card is the answer for you. They typically will extend credit to people with less than stellar or no credit before a major credit card company will. AND the credit limit will be low so you can establish good habits without going off the deep end.
It doesn’t matter how high the interest rate is if you can pay your balance off in full every month. This is the only way to go. I preach never to leave the store with a balance. Many, if not all, department stores will let you pay off your balance right at the cash register. I often pay with my Macy’s card to get the discount and then immediately following the purchase transaction, I pay off the previous amount. This way I can be sure I never have a balance on my card. This takes EXTREME discipline. If you cannot do this then DO NOT open a credit card.
If you are the type of person that can be disciplined enough to pay off your card immediately after your purchase then you must do yourself a favor and get a credit card from your favorite department store. Mine happens to be Macy’s because combining the incentives and perks of the card with their One Day Sales has to be the best deal in retail.
What are your thoughts on department store credit cards? Do you have one (or more)? What has your experience been with them? Leave a comment and let me know where you stand on the issue!
*Again, I am certainly not an expert on financial matters so please perform your own independent research before deciding whether to open a credit card.
- My Mother’s Day Wish List
- Macy’s One Day Sale: May 9th-11th!